What Is The Future Of Sin Stocks As A Whole?

In general, you will a few things happen:

#1. Some existing sin stocks will gain acceptance. For the most part, you can expect to see alcohol sin stocks, gambling sin stocks, and marijuana sin stocks will gain acceptance. These will likely retain their statuses as sin stocks, simply because of the regulations around each one, but we believe they will become more widely accepted.

#2. Some sin stocks may diminish in acceptance. It will take a while but if trends continue the way they are, we believe that tobacco sin stocks will diminish in acceptance. Part of the reason is: health awareness continues to trend upward; meanwhile, the tobacco industry’s ability to innovate in this area seems to be maxed out at this time.

#2. Expect large companies to become larger… and then to divest. Some larger sin stocks went through a period of consolidation in the last few decades (during which we saw companies like Philip Morris purchasing Kraft Foods), and then subsequent divestment (during which we saw companies like Philip Morris sell Kraft and then spin off into two separate companies — PM and MO). We’re seeing similar growth in alcohol sin stocks now. However, as companies grow, they become a target for accusations of becoming a monopoly, and they also discover that size doesn’t always provide cost efficiencies. There may be marketing advantages or tax incentives or competitiveness factors that make it more attractive for companies to NOT be so large. Therefore, we may see larger companies like Anheuser Busch Inbev (BUD) and Molson Coors (TAP) follow in the footsteps of Philip Morris.

#4. Expect to see pot companies to start and end, and consolidate. The newest form of sin stocks, marijuana companies, are so new and they face some interesting legal challenges in the US. The newness of this as a (possibly/barely) legal industry reveals new opportunities that companies pursue. However, the lack of information about how to run a publicly traded pot company means some companies will fold while others will do really well as companies try to figure out how to survive and thrive.

#5. As long as there is terrorism and growing fear, defense and prison sin stocks will remain strong. People love to hate defense sin stocks and prison sin stocks but people also hate fear. And right now, people are very fearful. And this probably won’t go away soon. Every time the news shows another senseless tragedy — especially one with ties to terrorism — people will want to feel safer and will look to their military and police (and thus: defense sin stocks and prison sin stocks) to protect them.

Summary. It’s hard to know for sure how the world will change. Historically, social attitudes swing back and forth between liberal and conservative viewpoints. If you can identify where we are right now, and accurately project which way the pendulum is swinging, you will likely understand what social values will be important to people and how that will influence what products they will want to own and therefore which stocks for you to buy and sell.

We believe that the current political climate is trending increasingly toward a liberal viewpoint but there are factors that can, at any point, swing the pendulum back the other way. From the politicization of race and gender to the fear of terrorism, these are daily news items that are impacting social values and may adjust the direction of the pendulum. Another 9/11, for example could hasten a more conservative approach. A Republican President who presides during a difficult financial crisis may be voted out in favor of Democrat President. Baby boomers versus Millennials on election day will also have an impact. Learn to watch for all the signs and read them, and consider how they will impact the products and services that your sin stock investments sell.

Bottom line: There will always be sin stocks. What determines a sin stock, though, will be the per-eminent social values of the day.

DISCLAIMER

Nothing on this site is a recommendation because, hey, I can't read your mind and I don't know what you have in your portfolio, and I'm not a licensed financial advisor. So never EVER trade without doing your due diligence. If you want more information about this fascinating topic, please check out the Sin Stocks Disclaimer page which basically says the same thing but more emphatically.